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Hollande: Colours To The Mast

by afew Sun Nov 18th, 2012 at 05:31:26 AM EST

Laurent Delahousse, news anchor on public TV channel France 2, asks the Minister of Education if François Hollande can now be called a "reformist social-democrat". Le Monde's Elysée correspondent Arnaud Leparmentier congratulates Hollande on being "social-liberal" (liberal in the economic sense, not as used in the US) and says "No, it's not a dirty word". Pundit Françoise Fressoz, in the same newspaper, writes that at last Hollande is taking it on himself to be "Hollandist", which she seems to define as being a social-democrat who will do supply-side stimulus. Michel Rocard says a signal has been sent to private enterprise, and about time too.

Though many of us might call Hollande's party "social-democrat", it defines itself as socialist. "Social-democrat", in current French political jargon, means pretty much "Gerhard Schröder". So there seems to be consensus in the political microcosm that Hollande is going Schröder's Way (aka Third).

There was a mammoth presser the other day at the Elysée (two and a half hours, four hundred journalists present), in which Hollande laid out the three pillars of his policy: a new direction for Europe, a forced march towards deficit reduction, and competitiveness.

The new "orientation" for Europe means solidarity, not austerity, says Hollande. To a considerable extent it looks as though he thinks most of that was achieved at the June summit, the one Germany back-pedalled from afterwards. Otherwise, this rather incantatory new direction is likely, in my view, to be invoked to validate any palliative measures that make the hurt just a bit less painful.

Because accepting the double German demand -- deficit reduction (along with the so-called golden rule) and competitiveness -- has nothing to do with solidarity and everything with austerity. And Hollande more than accepts both, he claims them as guiding principles.


Deficit reduction

Some numbers: Hollande intends to lop €60bn off public spending over the five years of his mandate, €12bn a year on average. In the "forced march" he has instructed Prime Minister Ayrault to lead, the 2013 budget is supposed to present a 3% deficit. This is to be financed by €20bn increased taxes and €10bn in spending cuts. (Yes, only €10bn. That leaves €50bn in spending cuts to be spread over the remaining four years of the mandate). Sugaring the pill are tax increases more particularly aimed at rents and high incomes (including the iconic temporary 75% marginal income tax rate), and ring-fencing for the education budget (with a rise in the number of teachers).

Of course, this is a declaration of virtuous intent. No one really believes the budget deficit next year will be 3%. Not even the PS: the new secretary-general of the party, Harlem Désir, has already come out with comments that suggest it wouldn't really be a big deal if the target were not met. However, the adhesion to the German doctrine on government deficits is clear, and stated as an objective over the five years to come.

Competitiveness

The government ordered up a report on the competitiveness of French industry from Louis Gallois, former CEO of EADS. It reads like a smartly-written plea for business-friendly policies. Smart in that it mentions problems either without fully addressing them, or by hi-jacking them in support of a supply-side agenda. Problems that are not really addressed include the abandonment of manufacturing for services more than thirty years ago; the financialisation of the economy and its destructive effect on industrial strategy; the chronic lack, in France, of the medium-sized enterprises that are an exporting strength of Germany (Gallois's recommendations for the support of SMEs are pretty much ritual in France); and mercantilism: that many industrial horses have already bolted because the Asian door is wide open, or that Germany pursues a beggar-thy-neighbour policy within the Euro area (though the report, p.10, does mention that the low salaries paid in Germany in the services sector would not be admissible in France). The one proposal concerning the euro was that France should do everything to persuade its partners that the euro exchange rate should slide downwards -- in other words (though not stated thus by Gallois), one of the reasons for the difficulties of French industry is that the franc went into the euro too high ; but a lower exchange rate with other major currencies would not affect the situation within the Euro area, where France's lunch has been eaten by Germany, so this proposition still tacitly refuses to address the real problems of the single currency area. For an instance of hi-jacking: the fact that French companies (automobile in particular) have for long maintained their product range at the lower to middle end of the spectrum (while Germany's position is more up-market) is not pinpointed as a failing of private enterprise strategy, but as a problem in that it makes French exports more price-sensitive (entry to mid-level products are bought by people who need to watch the price), and hence (you got it) sensitive to labour costs.

What the media make of it is the usual soundbite-size: France needs "shock treatment". The "confidence shock" for example (here's what Gallois says, p20):

Les chefs d'entreprises ont souvent le sentiment d'être « cloués au pilori » ; ils ont besoin d'être reconnus pour leur contribution au développement de l'économie. Ils veulent qu'on leur fasse confiance. Il appartient à l'État de créer cette confiance.Entrepreneurs often have the feeling of being "pilloried". They need to be recognized for their contribution to economic development. They want us to trust them. It is up to the state to create that confidence.

Yes, the state has to create an atmosphere of confidence in order to encourage investment (PPPs ahoy!). And, above all, the biggie for the media: the "competitiveness shock". You'll have guessed that it means reducing labour costs. That one works wonders, in that it creates "confidence" and "competitiveness" in one fell swoop. The focus of the Gallois report is on "reform" to halt "decline" -- and, as usual, "reform" means bringing down labour costs.

Reports of this kind are generally commissioned for their announcement-and-delay effect, and filed away in a drawer once delivered. It appears to me, in this case, that Louis Gallois has done what was expected of him in writing a manifesto for Hollande's five years. The report will be acted on.

"Tax wedge"

Spawned in the rancid entrails of some rightwing think tank and widely used by the OECD (did I hear someone ask what the difference was?), the term "tax wedge" is used to vilify employer contributions to social security (meaning, in the French case, national health insurance, pensions, unemployment insurance). Since these contributions are made to specific social security organisms, and are nominal, conferring personal rights to the employee and her/is family, these seem to me to be of a different nature from taxes. They enter, in fact, into the total cost of the position for the employer, which of course the employee has to earn -- and a fair share of them can be described as deferred salary.

Stepping back a little, it's also quite understandable for social security to be based on labour. At any time, social transfers towards inactive dependents (children, students, old people, disabled people, the unemployed) need to come from the active population and their earnings. However, the volume of these contributions in France is considerable (16.4% of GDP in 2010, greater than the Eurozone average), which can be pointed to as a contributory cause of high unemployment. The system was designed in the postwar years when a head of family could expect a lifetime job, and attempts to adapt it as conditions have changed have not been successfully accomplished. It's now more than twenty years since Michel Rocard introduced the CSG (General Social Contribution), a central government tax ring-fenced for social security, paid on income from work but also on capital gains, rents and pensions, at an approximate current rate of 8%. This is a flat tax ie not progressive. Raising yet more social security revenue through an increased CSG so as to lower payroll contributions by any significant amount would place a disproportionate burden on lower wage-earners and small savers.

Fiscal revolution

French economists Camille Landais, Thomas Piketty and Emmanuel Saez, authors of landmark studies on incomes, taxation, and social transfers (Piketty and Saez are known for their historical study of US income tax (pdf)), launched a movement in France for fiscal revolution (FR). Thomas Piketty, described in the media as "close to the PS", was involved in discussions on candidate Hollande's programme. The révolution fiscale sets out to remedy the major problems of the French tax and social contributions system: heavy payroll contributions discourage employment, attempts to alleviate that leave the social security (health, pensions) accounts in deficit; the system is not progressive because taxes are heavily skewed towards indirect taxation -- number one revenue, by far, comes from VAT, while the progressive income tax accounts for less than 6% of total taxes and contributions, and its "take" has slowly decreased over the past decades (company tax brings in half that percentage, and its "take" has decreased over the past ten years).

In fact, the flat-rate CSG brings in considerably more than the income tax. From the book Pour une révolution fiscale (Landais, Piketty, Saez):

The percentages here are of GDP. Over the twenty years since the CSG was created, income tax (white triangles) rates decline and loopholes increase, while CSG (black squares) rises to practically double, with the crossover in 1998.

Landais, Piketty and Saez consider that payroll contributions need to be considerably reduced, while the CSG should not be increased in compensation because non-progressive. They propose a complete makeover of the tax system in which the CSG would be merged with the income tax. The resulting new tax, pay-as-you-earn and made more progressive (higher rates on the upper brackets), should bring in higher revenue than the current CSG + income tax (~7.3% of GDP). François Hollande defended the merger idea in debate during the PS primaries, and the fiscal revolution proposal was seriously discussed with the Hollande presidential campaign. It was discarded. It would be for later on, in the "second mandate"...

Gallois report recommendations

Focussing exclusively on price competitiveness, Gallois proposes a "competitiveness shock" for French businesses by a reduction of €20bn in social contributions, with a €10bn reduction on the contributions paid by employees (total €30bn or 1.5% of GDP), preferably in one year, maximum two. To be offset by a CSG hike, some low-rate VAT rises, increased carbon tax and financial transaction taxes. To be clear, the proposal depends massively on the CSG rise (for €20-22bn of the total €30bn).

Government decisions

The government follows Gallois on the "competitiveness shock", but offsets it in a different way. French enterprises will receive €20bn in tax credit over three years (this is something like 30% of the company tax "take"). The €10bn for employees is shelved. The offset is to come, not from a CSG rise, but a VAT rise. In 2014, the main rate will go from 19.6% to 20%, the intermediate rate from 7% to 10%. The bottom rate, on food and vital necessities, will go down, from 5.5% to 5% (little gesture to make nice...). A further €10bn to be found by reduced government spending (presumably this is counted in Hollande's €12bn spending cuts per year).

"Social VAT"

Sarkozy's proposed increase of a couple of points of VAT to finance social security (and at the same time improve the trade balance by discouraging consumption, skewed in France towards imports), was opposed by Hollande during the campaign, and the measure was rescinded before application once he came into office. Hollande is now defending the idea, albeit in a watered-down form, in a move that is widely seen as a U-turn.

He gave up on the wide-ranging fiscal reform he not long ago defended, and has gone back on the "social VAT". Further, repeating the competitiveness mantra based on price competitiveness alone, and on labour costs alone as a price competitiveness variable. Add to this the espousal of the spending cuts agenda, and -- next on the programme -- negotiating labour market reforms with the unions.

The six months in which no one really knew what he was up to are over. Acceptance of German demands and a supply-side agenda. That will be François Hollande.

Display:
And continued destructions of Rom camps, and no softening of the constant police control in the suburbs, and building a useless airport near Nantes, little to no change in nuclear policy, "député maires" havent dropped one of their mandates as they had promised, a housing reform so badly managed it got canceled by the Conseil Constitutionnel, noise about cancelling the 35 heures.

It seems the only progressive measure that may pass this year is Gay marriages, and that without a true decision on adoption and fecundation rights... That not a lot.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Nov 18th, 2012 at 06:13:19 AM EST
Zapatero redux?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Nov 18th, 2012 at 03:15:04 PM EST
[ Parent ]
How long did it take for Zapatero to give up on most of his program ?

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Sun Nov 18th, 2012 at 04:15:20 PM EST
[ Parent ]
Zapatero never had an economic program, and he implemented his social program in his first term, 2004-8.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Nov 18th, 2012 at 04:20:25 PM EST
[ Parent ]
Basically he did not expect to win the election in 2004, so he mostly improvised. and he was overly susceptible to freemarketer siren's calls.

res humà m'és aliè
by Antoni Jaume on Sun Nov 18th, 2012 at 04:54:13 PM EST
[ Parent ]
AFP: Anti-gay marriage protesters rally in Paris
Thousands of Catholics and other opponents of French government plans to legalise gay marriage and same-sex adoption marched in Paris on Sunday, a day after more than 100,000 turned out across France for the cause.

The rally, organised by conservative Catholic group Civitas, was marred by accusations that journalists covering the rally and topless counter-protesters partially dressed as nuns had been roughed up by demonstrators.



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Nov 18th, 2012 at 03:45:48 PM EST
[ Parent ]
A ten thousand demo in Paris is pretty much a complete fail...

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Sun Nov 18th, 2012 at 04:14:38 PM EST
[ Parent ]
The media -- worldwide -- are saying 100,000 across France, as if that was huge.

But they've got the media running with it.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Nov 18th, 2012 at 04:19:06 PM EST
[ Parent ]
100k was Saturday, today (Sunday) was smaller - and also much more hate-driven (extremist groups)

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Nov 18th, 2012 at 05:18:19 PM EST
[ Parent ]
Tone has changed for police controls, the airport is nowhere near built, nuclear policy is changing (moving down to 50% is a real change for our nuke-crazy technocracy), the cumul des mandats story is not over yet, the housing reform hiccup is just a hiccup, the 35-hour week story was not a real one...

A big priority was to change the tone after the crazy years of Sarkozy - but that has created a big shock against the people that most benefitted from the Sarkozy years - the political journalists, who had read meat every day for the past 5 years, and now are starved - like junkies they are now screaming against the guy who is cutting them off.

Like Obama, part of the jobs is to just not be needlessly provocative of everybody, and to make the government work normally again. This is not very visible, not very important in the short term, but it does matter. No longer debasing government is a good thing...

There's been a pretty sustained political push to label Hollande as anti-business and anti-capitalist (with not so subtle threats about interest rates), but at least, in France, there is a also decent pressure from the left to limit the damage (and ET here is part of that). Even on economic policy, a lot of the moves have been to cancel the damage done under Sarkozy (the budget fighting has largely been done by increasing taxes back on the well-off rather than cutting services).

It is a reality that France needs to placate Germany in order to have Europe move to a better equilibrium than now (it may not be a good thing, but it's a reality), and I'd rather have François Hollande do it and try to be as fair as possible, than a Sarkozy or similar.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 18th, 2012 at 05:38:51 PM EST
[ Parent ]
For me it seems we're caught in multiple measurement traps.

(For now I'm going to ignore the Eurozone problem, because while it is part of the story, it could be fixed and there would still be pressures for "reform", "competitiveness" etc.)

Trap 1: Baumol.

Manufacturing productivity is going up. Service productivity is constrained. This means that countries with a greater level of manufacturing immediately have a better balance of payments - this is a "competitiveness" problem.

Trap 2: Consolidation

As manufacturing productivity goes up, it consolidates in fewer facilities - we can see this with the global car industry. As a result, over time we are left with nations with an inherent lack of manufacturing and the only way they could get some would be a zero-sum game with other nations. This is a driver of  the need for "competitiveness" but it results "reform" that is a race to the bottom. And there are no winners in such a system

Trap 3: Ricardo.

Krugman's works show pretty comprehensively that amongst advanced nations, comparative advantage is largely a myth - trade occurs in similar goods for essentially marketing, taste and variety reasons. This is a problem because it renders most "reform" for "competitiveness" worthless.

I got to all this because I'm left wondering what a country like France (or for greater Eurozone analytical simplicity, the UK) can actually do if it makes the balance of payments the king of economic indicators.

One thought is that (for example) Toyota built a competitor to Mercedes - Lexus. So it is possible to play the zero-sum game and make some progress. But I think we have to question:

a) If it's a zero-sum game, is it the right game to play? The game was sold as not being zero-sum.

b) As we've noted repeatedly, not everyone can be an above average exporter. Lexus was able to get some (largely in the USA) market share from Mercedes - but if we envision a new French Lexus and a Spanish one and an Italian one, etc. how much is there really to gain by this approach?

by Metatone (metatone [a|t] gmail (dot) com) on Sun Nov 18th, 2012 at 06:36:59 AM EST
Metatone:
countries with a greater level of manufacturing immediately have a better balance of payments

This is one of Gallois's shortcomings. Germany is export-competitive partly because it chose to hang on to its manufacturing industry. While France, more than thirty years ago, let manufacturing decline in favour of services and supermarkets.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Nov 18th, 2012 at 09:43:54 AM EST
[ Parent ]
And Louis Gallois is definitely part of the generation of French business leaders who presided over this manufacturing decline. Fox and hen-house...
by Bernard on Sun Nov 18th, 2012 at 11:40:20 AM EST
[ Parent ]
he's been in the aeronautics industry most of his professional life (and that one is doing well in France, even today), apart from a stint at the head of SNCF, the French railways, where he was highly respected and managed to pacify relationships between management and unions.

He is known for his integrity and lack of interest for money, an old school "moine soldat  of the république" - which gave him a rather good lot of credibility in his various jobs (because of the contrast with many others, I suppose...)

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 18th, 2012 at 05:21:25 PM EST
[ Parent ]
His personal integrity and lack of interest for bling-bling are not in doubt.

However, he is an unfortunate example of the intoxication of the French technocratic elite with neoliberal doctrines, as shown in his recommendations.

On another tack, he uses this report on "competitiveness" to dismiss renewable energy as too costly, and predictably pleads for continued nuclear along with (less predictably) fracking. The important point there is that he totally shelves any externalities and asserts that, on "competitiveness" grounds, the only criteria are those of narrowly-considered costs. Which is more evidence of liberal intoxication.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 02:15:23 AM EST
[ Parent ]
I saw his dismissal of renewable energy yes, and would tend to see this more as a case of relying on the prevailing consensus amongst the Serious People on topics he is not really familiar with.

In this case, the consensus in France is not neolib, it's heavily nuclear-leaning (as in "nukes to the exclusion of everything else"), which is mostly a ghost memory of what technocratic France could do at its best and is clinging to.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon Nov 19th, 2012 at 05:53:41 AM EST
[ Parent ]
Jerome a Paris:
a ghost memory

I agree, good definition.

What I meant was economic-liberal in Gallois's reasoning was that he insists that energy decision be taken on narrowly-defined costs alone (his examples of costs take no account of externalities nor of the merit order effect).

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 08:28:32 AM EST
[ Parent ]
True, but I'm willing to give him the benefit of the doubt of not knowing better (and I say that having been in multiple email discussions, and occasional public confrontations, with energy-focused representatives of the technocratic elite, and a number of the concepts I've presented here on ET barely register in their consciousness)

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon Nov 19th, 2012 at 09:55:21 AM EST
[ Parent ]
I'm pretty sure he doesn't know better.

But, in an "expert" called on by the government for a report, that's as worthy of criticism as knowing but omitting to say what one knows.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 10:14:04 AM EST
[ Parent ]
BTW, on the "ignorant but authorised to speak in public" score, after Gallois called for natgas fracking as a chance for France (lower energy costs = competitiveness), former PM Michel Rocard backed him up. And came up with this pearl (these pearls I should say) about the natural gas from Lacq in SW France.

Gaz de schiste, M.Rocard compare la France au Quatar. - Le blog de nongazdeschisteinfos (Le Monde) Shale Gas, M.Rocard compares France to Qatar. - Blog nongazdeschisteinfos (Le Monde)

Le gouvernement a-t-il eu raison de ne pas suivre M. Gallois sur le gaz de schiste ?

Sur ce sujet, étant très écolo, je me suis longtemps abstenu. Mais je n'ai rien lu qui soit complètement convaincant. On a un réflexe fantasmé un peu du même type que face aux OGM. Quand on sait que le gaz de Lacq était extrait par fracturation hydraulique sans dégâts sur place, on s'interroge. Or la France est bénie des dieux. Pour l'Europe, elle serait au gaz de schiste ce que le Qatar est au pétrole. Peut-on s'en priver ? Je ne le crois pas.

Was the government right not to follow Mr. Gallois on shale gas?
On this subject, being very ecology-minded, I have long refrained from speaking. But I have not read anything that is completely convincing. People have a fantasized reflex a bit like with GMOs. When you realize that gas from Lacq was extracted by hydraulic fracturing without damage on site, one wonders. But France is blessed by the gods. For Europe, France would be to shale gas what Qatar is to oil. Can we do without it? I do not think so.

(from a Le Monde interview behind subs wall, copied on another site)

Following Rocard, ex-Prime Minister and current candidate for the leadership of the UMP, François Fillon, repeated the same point about Lacq.

Gaz de schiste, gaz de Lacq : les erreurs de Michel Rocard et de François Fillon Shale gas, Lacq gas: Michel Rocard and François Fillon's errors
Comme Michel Rocard - décidément un des esprits les plus éclairés du pays - l'a dit : le gaz de Lacq était extrait par fracturation hydraulique et ça ne faisait de peine à personne..As Michel Rocard -- definitely one of the most enlightened minds in the country -- said: Lacq gas was extracted by hydraulic fracturing and it did no harm to anyone ..

Le Monde itself picked up the claim and subjected it to fact-checking:

Gaz de schiste, gaz de Lacq : les erreurs de Michel Rocard et de François Fillon Shale gas, Lacq gas: Michel Rocard and François Fillon's errors
de fracturation hydraulique, il ne fut pas question, car "comme tous les gisements de la région Aquitaine, Lacq est naturellement fracturé", explique un chercheur de l'université de Pau et des pays de l'Adour (Pyrénées-Atlantiques). there was no question of hydraulic fracturing, since "like all gas deposits of the Aquitaine region, Lacq is naturally fractured" says a researcher at the University of Pau(Pyrénées-Atlantiques) .
Un constat confirmé par Nicolas Terraz, directeur général de Total Exploration-Production France, filiale du groupe pétrolier qui gère les puits aquitains depuis la fusion d'Elf et de Total : "Les réservoirs disposent, c'est exact, de réseaux de fractures naturelles. La roche (du calcaire) a dû être stimulée, mais pas par fracturation hydraulique. La technique de l'acidification a été utilisée.An observation confirmed by Nicolas Terraz, CEO of Total Exploration-Production France, a subsidiary of the petroleum group that has managed the Aquitaine wells since the merger of Elf and Total: "The reservoirs have, it is true, networks of natural fractures. The rock (limestone) had to be stimulated, but not by hydraulic fracturing. acidification technique was used.

We should have a Former PM alert

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 10:46:32 AM EST
[ Parent ]
When you realize that gas from Lacq was extracted by hydraulic fracturing without damage on site, one wonders. But France is blessed by the gods. For Europe, France would be to shale gas what Qatar is to oil.
For fans of France's low-carbon economy (such as Thomas), France switching from nuclear to shale gas must be quite a sight.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Mon Nov 19th, 2012 at 10:50:15 AM EST
[ Parent ]
France's lack of oil resources is a still-festering wound... Of course it was what led to the all-nuke policy in the 1970s.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 10:57:30 AM EST
[ Parent ]
Oh, guess how Google Translate renders M. Gallois?

OK, you got it.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 10:55:58 AM EST
[ Parent ]
Wow.


-----
sapere aude
by Number 6 on Mon Nov 19th, 2012 at 11:33:55 AM EST
[ Parent ]
... it's not about Gallois' individual achievements at EADS or SNCF, nor his personal integrity, as reminded by afew: it's just that, as a group, and over the past couple of decades, French business executive have run a strategy of de-focussing on manufacturing in France -- remember Alcatel, a "company without factories" from a decade ago?

While the manufacturing science - embodied by the Japanese companies during the 80s-90s, has always been taken seriously across the Rhine, it has fallen out of fashion in France -- along with the number of workers employed, even for the automobile industry, heck even for the nuclear industry where the security minded old hands are being replaced by short-term bottom line oriented subcontractors.

In that regard, it is rather ironic that a member of the very group that has shed hundreds of thousand, if not millions of jobs in France over the past forty years is tasked with providing the recipes for reverting the damage --Mr.Gallois' own qualities notwithstanding-- particularly when he ends up presenting pretty much the same TINA "one-way agenda" you and afew were denouncing five years ago.

by Bernard on Mon Nov 19th, 2012 at 10:14:26 AM EST
[ Parent ]
...is the right word here.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Mon Nov 19th, 2012 at 10:42:55 AM EST
[ Parent ]
Well, again: Louis Gallois is a real industrialist, who cannot be blamed for these trends (and he's also neither an X nor an énarque) as he certainyl did not preside over that wherever he was.

And (we probably need a diary on this) I'm not sure deindustrialisation means anything. Most of the value added in our society comes from services, not from manufacturing, and I wonder if we're not re-creating a movement like the luddites a couple of centuries ago (the only wealth is what is produced from the earth / you can't eat machines, etc).

When an iPhone is sold 500 euros, only a few euros represent the actual manufacturing cost, most of the rest goes to design, marketing, transport and retail (not to mention taxes and profits). We are largely post-industrial societies, and not all value derives from making things, or the services around that. Plus, as internal services of manufacturers are outsourced, a lot of what used to be industrial GDP is now measured as services (the cleaningof facilities , to take but one exemple).

Again, we are in a period of heavy capital investment by China and a few others, which favors machine-makers like Germany.


Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon Nov 19th, 2012 at 12:35:20 PM EST
[ Parent ]
Jerome a Paris:
Louis Gallois is a real industrialist, [...] (and he's also neither an X nor an énarque)

As I said, this is not about Louis Gallois personally: he's a French "grand patron" (and a rather respected one at that) among others, of many backgrounds or achievements.

Jerome a Paris:

Most of the value added in our society comes from services, not from manufacturing, and I wonder if we're not re-creating a movement like the luddites a couple of centuries ago (the only wealth is what is produced from the earth / you can't eat machines, etc).

That's a good question indeed: but since the famous report is about "competitiveness" and particularly competitiveness vis a vis Germany, one can't help to point out that a fair amount of manufacturing has remained in Germany (machine tools, automobile, etc...), even though there are German cars manufactured in "Eastern" Europe -- and what about wind turbines? So not all of our society is "post-industrial" it seems...

The iPhone is typical of the "Designed in California, manufactured in China" model but that's not the case for many products and indeed as you point out, services.

Jerome a Paris:

Again, we are in a period of heavy capital investment by China and a few others, which favors machine-makers like Germany.

So having an industrial base is useful after all...

by Bernard on Mon Nov 19th, 2012 at 12:53:04 PM EST
[ Parent ]
Probably worth a diary by you and/or Jerome. Or one diary each, from your different perspectives.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Mon Nov 19th, 2012 at 02:29:34 PM EST
[ Parent ]
Bernard:
the famous report is about "competitiveness"

And it is quite specifically about the competitiveness of French industry.

Full title: "Pact For The Competitiveness Of French Industry."

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 02:35:55 PM EST
[ Parent ]
To be fair, "French industry" does not always imply manufacturing in France: as I pointed out, a growing number of industrial companies in electronics keep (some) R&D, marketing, Ops, etc... in France with manufacturing itself subcontracted to Jabil, Flextronics and other EMS companies. Not necessarily in Asia: The border towns in Ukraine, near Slovakia or Hungary are full of factories cranking out stuff for Alcatel, Valeo, Technicolor, Sagem, etc...

But even leaving manufacturing aside, and for the bits remaining in France, the conventional wisdom expressed in the report always comes back to: "more competitiveness" --> cut workers benefits and tax breaks for the employers.

by Bernard on Mon Nov 19th, 2012 at 04:32:59 PM EST
[ Parent ]
My point about Baumol is that the way we measure productivity can tilt people to believing that manufacturing is a growth engine - and indeed a balance of payments engine.
by Metatone (metatone [a|t] gmail (dot) com) on Mon Nov 19th, 2012 at 01:00:12 PM EST
[ Parent ]
Just to read what delirious Germans may think of Louis Gallois:

France's elites are in denial | Presseurop (English)

in view of France's steadily declining competitiveness and its horrendous national debt (currently at ninety percent of its GDP), a question comes up: are we dealing here with a naive blindness all round - or with the perhaps final Pyrrhic victory in the French art of throwing smoke?

Why did no one look any closer? One explanation, implicit and given unintentionally, was a statement two weeks ago by the former EADS CEO Louis Gallois, who gave a damming verdict on the French economy and demanded radical reforms. A "confidence shock" is needed, said the man who had made a career for himself out of lucrative government contracts. The tremolo to his voice, afflicted by crisis, was once again half-Bolshevik and half gold-plated, perfectly matching the working range of the declared enemy of globalisation, Arnaud Montebourg, who marches under the banner "Minister for the Restoration of Production."

German delirium is -- truly -- a serious problem.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 21st, 2012 at 04:41:25 PM EST
[ Parent ]
From Die Welt.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Nov 21st, 2012 at 04:42:58 PM EST
[ Parent ]
...I'm left wondering what a country like France (or for greater Eurozone analytical simplicity, the UK) can actually do if it makes the balance of payments the king of economic indicators.

Not much.

China is poised to become the largest world's economy.  Their cost of living is 48.82 versus a COL in France of 98.19 and in the UK of 100.13.  VERY roughly China can pay it's workers 48% of the wages needed in French and the UK for roughly the same standard of living.  Plus China has room to increase wage rates and still keep labor costs below France and the UK.

 

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Sun Nov 18th, 2012 at 12:31:50 PM EST
[ Parent ]
"Competitiveness" invites us to race to an unattainable bottom.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Nov 18th, 2012 at 01:48:53 PM EST
[ Parent ]
If the main economic indicator is the balance of payments, then a currency union is part of the problem, not part of the solution.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Nov 18th, 2012 at 03:11:08 PM EST
[ Parent ]
Considering that quite a bit of that purchasing power depends on cost of services, you can't really expect Chinese to have the same living standards as Europeans with half the wages if the wage distribution becomes similar to Europe...

For example when I was in Vietnam, live-in help was pretty much affordable for the middle class, which it isn't in the west !

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Nov 18th, 2012 at 04:11:54 PM EST
[ Parent ]
I'd quibble about "same standard of living" but life is too short. :)

If I may play "Lies, damned lies etc":
Comparing 2009 and 2012 values, France has dropped from 120 to 98 (-19%), and China has increased from 43 to 49 (+12%). At that rate they'll meet in 2020 or so.

(Thanks for link. Arrgh. Siren call of statistics. Must resist urge to do comprehensive comparison for all countries.)


-----
sapere aude

by Number 6 on Mon Nov 19th, 2012 at 10:17:13 AM EST
[ Parent ]
(2009 and 2012 only):
Most of Eurozone down modestly, same as US.
Australia from 83 to 123!
Greece from 77 to 93.

I cannot tell much from these figures. Perhaps "Local Purchasing Power Index" is the interesting one.


-----
sapere aude

by Number 6 on Mon Nov 19th, 2012 at 10:43:03 AM EST
[ Parent ]
LPPI, 2009 and 2012 only:

France: 45 to 93, more than doubled!
Germany: 74 to 114.
Greece: 38 to 48.
Ireland: 60 to 90.
China: 35 to 30.

Too much noise in this one. Cannot tell anything.
Unless being able to buy more services means things like an influx of domestic help is flooding the market and making those services cheap.

-----
sapere aude

by Number 6 on Mon Nov 19th, 2012 at 10:55:04 AM EST
[ Parent ]
There was an unusual combination of factors in the past 10 years:
  • Germany entered the euro with an overvalued DM rate, and chose to live through austerity in the early years (they had crappy growth for most of that period, remember). For them, it "works" (they went from below average to above average in the period, in a sense, so "others can do it too")
  • China's investment boom has meant a lot of purchases of capital goods, a sector where Germany is traditionally strong (and which was seen as a handicap 10-15 years ago, and may again turn out to be seen as such in a few years' time, if China's economy moves to another mode of function)
  • EU enlargement has given German firms the ability to offshore production of lots of things to nearby low wage - and eager - countries. some calculations suggest that Germany just assembles goods made elsewhere (like China) for a large chunk of its exports.

Given their demographic make-up, it's not completely surprising that Germany's policy should be focused on maintaining surpluses for now, as they will need to be cashed in later when their workforce shrinks. What's rather striking is our poor these external 'investments' (or assets) have been, so we may not have hear the end of that story...

Within the eurozone, Germany has actually been given a freeride by France, which was more competitive, and has chosen to continue to share productivity gains with workers, rather than depriving them, like in Germany (and the US), at the ultimate expense of its external trade balance. A lot of the gains made by Germany are directly at France's expense. A move by France to fight that might actually be the thing that breaks the German economic "miracle"...

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 18th, 2012 at 05:48:39 PM EST
[ Parent ]
A move by France to fight that might actually be the thing that breaks the German economic "miracle"...

There's no evidence of that. Instead, Hollande embracing the need to reduce budget deficits will tip France into a longer recession than forecast.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Sun Nov 18th, 2012 at 06:15:58 PM EST
[ Parent ]
Yes, but a French recession (and lower imports from Germany) would impact Germany more than any other country.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Nov 18th, 2012 at 06:18:52 PM EST
[ Parent ]
As if Germans care... (you personally know German businesspeople don't)

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Nov 18th, 2012 at 06:24:57 PM EST
[ Parent ]
This does however come down to a trade war between the two major founding partners within a single market and single currency zone.

Why is it happening, and who is principally responsible?

The answer to that question is not, in any case, labour.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 01:59:55 AM EST
[ Parent ]
Agreed. But it's a competition between local elites as to who can squeeze their own labour faster, and within the eurozone, it's still largely a zero-sum game.

Pint is, France wasn't playing at is as hard as Germany, so if France starts doing it, it will bite Germany a bit more than if Greece does it.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon Nov 19th, 2012 at 05:55:42 AM EST
[ Parent ]
So, if France's elite starts competing with Germany's elite as to who can squeeze their labour faster, Germany will feel the bite.

You make it sound like a good thing.

Do you see no other way France can "fight back", preferably without screwing the French?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Mon Nov 19th, 2012 at 06:26:43 AM EST
[ Parent ]
The depressing thing with this crisis has all along been that the non-painful solutions are known but the only way to get there is to inflict pain to the powerful, and that means more pain for the others along the way.

It's a case of killing the host to kill the out-of-control parasite, and hoping that the host revolts before it dies.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Mon Nov 19th, 2012 at 09:52:41 AM EST
[ Parent ]
So we all agree (and agree with The Economist) but for different reasons: the French are screwed.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Mon Nov 19th, 2012 at 10:03:14 AM EST
[ Parent ]
i don't know about portugal, or greece, (or both!). but isn't a given that germany's economy will hit the wall when_any_ of the other euro-economies goes south and wants to bail from the common currency to survive.

i wonder if beppe will empower that move in italy, he has made similar noises.

i remember Jake S advising greece here years ago to bail right away befor condirions rapidly worsened, and here we are...

they seem to have two options, keep fudging, cutting slack, kicking and screaming all the way, to the PIIGS,  and/or letting a country opt out and devalue asap.

the reality check will come at point b.

point a just keeps baiting the spread to widen. tossing scraps to piranhas just whets their appetite, though it gives the illusion of buying time...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sun Nov 18th, 2012 at 07:55:54 PM EST
[ Parent ]
Jerome a Paris:
chose to live through austerity in the early years (they had crappy growth for most of that period, remember)

France too, at the same time, in order to comply with Maastricht.

As for Germany, reunification was a special circumstance that can't be left out of the account. It's a false narrative to suggest that Germany made a virtuous choice of austerity in order to prepare better years for later.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 01:55:15 AM EST
[ Parent ]
chose to live through austerity in the early years (they had crappy growth for most of that period, remember)

France too, at the same time, in order to comply with Maastricht.

What are you guys talking about? Both Germany and France broke the 3% deficit limit repeatedly until the rules were changed in 2005 to avoid having to impose sanctions.

Because, you know, rules are not for Germany (of France, when it suits Germany).

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Mon Nov 19th, 2012 at 02:50:23 AM EST
[ Parent ]
I was talking about the early 1990s.

I may have misunderstood what period Jerome was talking about.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 02:53:55 AM EST
[ Parent ]
a forced march towards deficit reduction, and competitiveness

He's going to destroy the French economy doing that (deficit reduction will strangle the private sector, preventing firms from investing, and driving households to insolvency). And competitiveness is a red herring.

FT: Competitiveness will not save the euro (By Wolfgang Münchau, 11 November 2012)

Last week a report by Louis Gallois, former chairman of EADS, suggested measures to render France more competitive. The report and the debate that came with it reflect a wider intellectual muddle about the nature of reforms. I detect a triple misdiagnosis - about the effects of reforms in Germany; about the kind of reforms that are now needed in France, and in Italy and Spain; and about the focus on competitiveness.

...

Lastly, why do we always focus on competitiveness? Businesspeople talk endlessly about it but it is a less useful concept on a macroeconomic scale. It conflates two concepts: macroeconomic competitiveness, as expressed by the real exchange rate, and total factor productivity, or TFP, a proxy for a country's technological dynamism. A cut in unit labour costs is only a gain if you achieve it but nobody else does. Once you advocate it as a policy for everyone in the eurozone, you end up in a zero-sum game. We cannot all devalue at the same time. If we are saying that the eurozone should reduce unit labour costs to the level of Germany, why do we think that Germany will not do the same?

So that leaves TFP. This would be fine, but then it would be better to focus on it specifically, rather than through the distraction of the nebulous concept of competitiveness. Furthermore, we may not know as much about TFP as we think.



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Nov 18th, 2012 at 06:51:14 AM EST
Have we already had a diary on TFP?
Seems like an important issue.
We need to construct an alternative to "competitiveness" "reform"...

My google skills are weak this morning...

by Metatone (metatone [a|t] gmail (dot) com) on Sun Nov 18th, 2012 at 06:55:52 AM EST
[ Parent ]
Of course, reading the Noahopinion piece linked to from my 70's diary, it seems that any discussion of TFP points very strongly back to the Baumol rabbit hole.
by Metatone (metatone [a|t] gmail (dot) com) on Sun Nov 18th, 2012 at 07:00:08 AM EST
[ Parent ]
Migeru:
why do we always focus on competitiveness? Businesspeople talk endlessly about it

Indeed they do, and they're talking a lot in France right now.

But so does Merkel...

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Nov 18th, 2012 at 09:40:19 AM EST
[ Parent ]
May not be important on the macro level.  It's very important on the micro level.  If country A makes and can sell a widget at 3 common currency units and country B makes and sells the same widget at 10 common currency units country B isn't going to be making that widget for very long.

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Sun Nov 18th, 2012 at 12:17:53 PM EST
[ Parent ]
But rich countries deals in brands, not kilogrammes.

So perhaps country B's widget is made in an area that is named like the most famous version of the product. Maybe the manufacturer of the product from country B has a reputation for excellence, or they have had the right celebrities flash their product. Or maybe products from country B has inheritly higher status because country B is known as richer.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Sun Nov 18th, 2012 at 02:59:42 PM EST
[ Parent ]
Ricardo and comparative advantage - but then again it has been debated here on ET whether Ricardo was obsolete at a time when you could actually move all the capital to one country...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Nov 18th, 2012 at 05:50:08 PM EST
[ Parent ]
Ricardian comparative advantage is only a reasonable description under balanced trade or (inclusive) full capacity utilization. Naive Ricardian models also require capital immobility, but this assumption can be relaxed in more recent modeling architectures.

It is noticeably not applicable to the present Sino-American trade bloc, nor the EZ-17 one, both of which suffer from deficient overall aggregate demand combined with highly lopsided trade patterns. (Nor, for that matter, are any of the other general equilibrium based trade models.)

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Nov 20th, 2012 at 09:53:23 PM EST
[ Parent ]
The new "orientation" for Europe means solidarity, not austerity, says Hollande.

The EU budget negotiation will be a litmus test for this. Germany is spearheading a faction of net contributor states who want to reduce structural funds significantly. Of course, they also want to reduce the CAP. France is making noises about the CAP, but not so much about the structural funds.

From EU Observer: EU budget 2014-2020: The €1 trillion deal (Links dossier)

Issues

In a bid to woo member states that are opposed to further rises in the EU budget, the Commission proposed to reduce national contributions, in line with austerity measures adopted across Europe in the wake of the financial and economic crisis.

To allow this, the Commission suggested levying new taxes directly in order to increase the Union's so-called "own resources", a proposal that was strongly rejected by the UK, which labelled it "unrealistic". Germany is also opposed while France has taken the lead in defending the Commission's plan.

...

The wider climate of austerity and rising scepticism towards the EU have affected the Commission's budget proposals.

At the time of the proposal's presentation, Budget Commissioner Janusz Lewandowski had said the EU executive's philosophy consisted of "financing more Europe with the same levels of money, taking account only of inflation."

This came as many powerful member states pushed for a smaller budget. In May 2012, Germany, Italy, Britain, the Netherlands and three other countries sent a joint letter to the Commission opposing any increase. They said: "The Commission proposal is too high. ... The new MFF should not lead to an increase in national contributions to the EU budget ... We need to spend better, not to spend more."

France, which had initially signed a similar call the previous year under then-President Nicolas Sarkozy, is still undecided but appears opposed to such a hardline stance. Seen from Paris, the EU budget must reflect the government's priority to support economic growth while keeping with national commitments to rein in public deficits.

"Despite constraints, there is an ambition for the Union's budget," said Europe Minister Bernard Cazeneuve, adding that France was "very aggressive" in supporting "own resources" for the EU budget, placing Paris firmly on a collision course with Berlin, which wants to retain national contributions as the biggest share.

...

Perhaps the most significant feature of the new financial framework is the stark decline in farming policy. This was long by far the biggest item in the EU budget, a legacy of then-heavily rural France's commanding influence in the European communities' early years. In the 1970s, the Common Agricultural Policy (CAP) represented 80-90% of the budget.

...

The Commission may find such audience-targeting necessary as many member states are set to lose funds in the proposals as the CAP's budget not only shrinks but also shifts towards Central and Eastern Europe.

This could mean an up to 7% decline for western countries. The major beneficiaries of agriculture policy will no doubt fiercely oppose this. France and Spain have already made their discontent known.

...

As many regions, thanks to EU funding, are now out of the convergence criteria, covering Europe's poorest regions whose GDP is less that 75% of the EU's average, a new `transition region' category is to be created, which will make regions whose GDP is equal to 75-90% of the EU average eligible for funding, This will effectively allow regions in the wealthier member states to continue their access to these funds, and prevent their being monopolised by new member states.

Countries like France, Germany and the United Kingdom will therefore maintain a stake in the programme. So-called `less-developed regions' - mostly in Central and Eastern Europe but also in parts of they Mediterranean and represent just under a quarter of the EU's population - would still receive almost 70% of the funds.

Another major new feature will be the extension of `macroeconomic conditionality' to regional funds to help enforce budget discipline among national governments. This has already been partially implemented since the entry into force in December 2011 of the so-called "six-pack" reinforcement of the Stability and Growth Pact.



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Nov 18th, 2012 at 06:59:37 AM EST
European Tribune - France is not in decline and the last thing it needs is 'reform'
"Reform" is here between quotes, given the extent to which it has become a more or less explicit codeword for a one-way agenda: liberalizing the labour market, weakening union power and State regulation of business, and reducing taxes. Cheaper workers, it is assumed, will lead to greater competitiveness, higher profits and, therefore, more jobs.

The problem is that this programme is based on a view of economic reality that is neither impartial nor complete.

Plus ça change...

by Bernard on Sun Nov 18th, 2012 at 11:43:58 AM EST
The propaganda for "reform" certainly hasn't abated... If anything, it's become more insistent and the air of inevitability now permeates everybody, in particular the French elites.

If anything, the past 15 years have been those of the French exception becoming inaudible in Brussels, and French technocrats becoming undistinguishable from others in terms what regulation should do. They are still good a fighting for narrow French (or "French based corporate") interests, but not at defending a different vision of what the EU should do.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 18th, 2012 at 05:52:52 PM EST
[ Parent ]
Well, yes, 5 years already, but judging by some comments you might say only five years:

" Re: France - Sarkozy (none / 0)
That is the talent to be a good politician but he had to follow what Chirac decided, and Chirac was everything but right-wing.

Chirac has been affraid by the leftists since May68, this period is going to an end, Sarko will be a non-ashamed Right-wing and one of the most, if not the most, important leader in Europe.

By the way, with the disappearance of Lepen, The left will find very difficult to get back in power.

It is really an new era. "

OK, so that was pure right-wing drivel, but still, it does look silly five years later.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Nov 19th, 2012 at 01:46:27 AM EST
[ Parent ]
It would appear the one thing you can count on, no matter the nation, party, political office, or locale, is that the bankers will be in charge in the end.
by tjbuff (timhess@adelphia.net) on Sun Nov 18th, 2012 at 06:06:47 PM EST
indeed... it occurs to me that banking has something in common with nuclear power, both are weapons of mass destruction when not managed with scrupulous rigor utterly beyond our capacity as a species to take mature responsibility for.

both seem spectacularly, sociopathically bereft of any redemptive human-heartedness.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sun Nov 18th, 2012 at 07:43:06 PM EST
[ Parent ]
both Fillon and Copé say they've won the election to be the boss of the UMP, so this could be fun...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Nov 18th, 2012 at 06:19:47 PM EST
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 19th, 2012 at 05:16:47 AM EST
[ Parent ]
FT.com: What not to worry about in the euro crisis (Wolfgang Munchau, 18 November 2012)
My list of things not to worry about contains five items. The first is France. The Economist last week appeared to pass the honorary title of "sick man of Europe" to France. I think this is wrong. The relatively robust growth during the third quarter was a fitting example that France is often more resilient than forecasters and commentators generally acknowledge. The French economy has had a relatively good crisis and has often defied negative expectations, especially from commentators who view the universe from a perspective of competitiveness alone. I suspect that the currently fashionable French-bashing is politically motivated - a rightwing reaction against a Socialist president. I am wondering that if France was really an economic basket case, why did so few people say so while Nicolas Sarkozy was in power? What reforms did he make? In 1999, by the way, The Economist awarded the title of "the sick man of the euro" to Germany.


I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Mon Nov 19th, 2012 at 05:04:02 AM EST
I think Münchau is too optimistic about extremist parties. Hungary is an example what can be done with a very slight majority. The EU complained about the constitutional reforms this time. In other places there may be no such obvious overreach and more patience.

In my years in Brussels I have learnt never to underestimate the ability of European technocrats to find money.

That's either beautiful or scary.

-----
sapere aude
by Number 6 on Mon Nov 19th, 2012 at 10:02:04 AM EST
[ Parent ]


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